1. Unlimited Personal Liability

• The owner is personally liable for all debts and obligations of the business.
  
• If the business incurs losses or faces legal action, the owner’s assets can be used to cover liabilities.
  
• There is no legal distinction between the individual and the business entity.
  
• This can lead to significant personal financial risk in the case of failure.
  
• Sole proprietorship is not suitable for high-risk or large-scale ventures.
  

2. Limited Access to Capital

• Raising funds is difficult as the business cannot issue shares or bring in partners.
  
• Banks and investors are often reluctant to lend to sole proprietors without collateral.
  
• Growth opportunities may be restricted due to a lack of financial support.
  
• All funding must come from personal savings or loans in the owner’s name.
  
• Expansion is often limited compared to other business structures.
  

3. No Continuity or Succession Planning

• The business does not continue automatically after the owner’s death or incapacity.
  
• It may need to be closed or transferred through informal arrangements.
  
• There is no legal provision for perpetual succession.
  
• This creates uncertainty for employees, clients, and vendors in the long term.
  
• It is not suitable for those looking to build a legacy business.
  

4. Limited Managerial Expertise

• The owner is responsible for all aspects of management and operations.
  
• A single person may not have expertise in all business areas, such as finance, marketing, and legal compliance.
  
• There may be difficulty in handling complex or growing operations.
  
• Lack of support can lead to burnout or mismanagement.t
  
• Business performance can suffer from limited skills or resources.
  

5. Restricted Business Credibility

• A sole proprietorship may not be seen as a professional or reliable entity by large clients or vendors.
  
• Absence of a legal structure can limit credibility in formal business transactions.
  
• It may not be eligible for government tenders or corporate contracts.
  
• Registration documents are limited compared to registered companies.
  
• Perception issues can affect business reputation and growth potential.